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Summary:

Our coverage universe of 124 stocks is expected to report ~5.2% yoy
revenue growth, however revenue growth ex- O&G &BFSI should
be lower at ~4.2% yoy with operating profits growth of 1.9% yoy
(~40bps yoy contraction in margins). Currency led IT & Pharma
sectors are expected to lead top line growth (15%+ yoy), while
Auto, Capital Goods and Cement sectors are expected to report muted
top line growth (< 5% yoy). What are our key monitorables apart
from the headline performance? Automobiles – Flattish revenue
trends for most OEMs driven by weak volumes, with M&M being the
notable exception on the back of tractor volumes. Auto ancillary
names to mirror the OEM weakness while battery makers are expected
to record positive growth driven by the replacement market.
Sequential margin expansion seen for Maruti, Amara Raja and Exide.
Cement – Cement companies in our coverage universe expected to
report muted volume growth of 2.5% y-o-y. Average realisations are
expected to de-grow by 5% y-o-y on weak demand and lower
utilisations. With higher cost inflation, we expect margins for all
the companies to contract on a y-o-y basis. Cap Goods, Engineering
and construction – Order inflow is expected to remain restrictive
for most capital goods and construction companies as traction from
infrastructure and industries remain muted. Margins and working
capital situation are expected to be stretched due to delays in
execution. Growth in consumer durables is expected to remain robust
on the back of strong demand Financials – Incremental restructuring
to continue to remain high, but expect pace to trend down from 4Q.
Credit growth to remain muted, in line with seasonality. Treasury
incomes to rise for banks with large AFS portfolios, due to fall in
government bond yields during the quarter. Asset quality stresses
to remain elevated for PSU banks. Consumption - Early onset of
monsoon and disruption of one month sales in Maharashtra due to
distributors protesting against charge of additional Local Body Tax
(1% - 1.5%) should keep volume growth subdued. Inching up raw
material costs and rupee depreciation to impact margins.
Infrastructure/ Power – Gas based power plants to witness very low
PLFs due to supply cut from Reliance’s KG D6 – negative for Torrent
Power and Lanco Infratech; NHPC to witness a good quarter due to
seasonality; un-remunerative PPA tariffs a negative, particularly
for Adani Power; PTC India and Nava Bharat Ventures will likely
benefit from a buoyant merchant market; ports and road developers
will witness a flattish/ qoq dip in performance Oil & Gas –
Expect 1Q Oil Under Recoveries of Rs. 273bn and 55% ($56/bbl)
upstream subsidy share. Sustained high subsidies despite reduced
crude prices to weigh on Upstream PSUs earnings. Fx loses and net
under recoveries to entail huge loses for OMCs. Gas Utilities would
continue to face weak volumes and higher costs Pharma –
Implementation of the new pricing policy is expected to impact
domestic businesses of all companies. Channel inventory reduction
is likely to lead to muted domestic formulations growth for the
quarter. The sharp qoq movement in USD:INR (59.4 vs. 54.5) will
result in MTM losses for Aurobindo, Glenmark and Jubilant Life
Sciences which have substantial dollar-denominated debt. IT – We
expect US$ revenues growth to be in the range of 0.6% - 3.6% QoQ
(mostly driven by volumes) for Tier 1 IT vendors. EBITDA margins
could be flat or negative impacted by wage hikes and visa costs
o...

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